At first, glance, getting a mortgage seems impossibly complicated. Layers and layers of financial requirements, plus enough paperwork to keep you busy for a lifetime. It’s a daunting task that can turn into a test of character.
But it doesn’t have to be that way. The process of getting a mortgage can be simplified, and once you do this the different steps will be very straightforward.
So what is needed for a mortgage of house loan? Start with the basic documentation. There are a total of seven fundamental documents you’ll need when you apply for a mortgage, starting with your tax returns, bank statements, and pay stubs.
These provide lenders with a financial snapshot that tells them the basics they need to know. They’ll also want to know your credit history, along with any gift letters from family or friends who are helping you financially by giving you money to put toward the mortgage.
A photo ID is required, of course, and if you’ve been renting lenders will want to know your history in that area. Lenders want to know that you can pay on time, and this history can be even more important if you don’t have a lengthy credit history.
Now let’s talk about the basics of how much money you’ll be able to borrow. The financial formula lenders use is simple—they want you to spend less than 28 percent of your income before taxes on housing, and approximately 36 percent to keep up with whatever debt you have.
If either one of these numbers is off by a significant degree, you’ll probably have to answer some questions as to why. This won’t necessarily prevent you from getting a mortgage, but it is something you should know in advance.
The percentage you spend on debt is especially important. If it’s higher than 36 percent, this may lower the amount of money you can borrow, so its a good idea to lower your debt before you apply if you can.
Don’t despair if you do have setbacks, and above all don’t give up. The biggest thing you’ll need to get a mortgage is persistence, and if you’re willing to keep at it the rest of the process will eventually fall in line.